PSU banks rating outlook likely stable on strong govt

A strong government at the Centre and stability in macro economic factors are likely to keep rating outlook of the country's public sector banks stable for some time, says a report by rating agency Fitch.

The macroeconomic and political risks have abated in the country since the election of a new government with a decisive mandate, the report said.

"That may have contained further downside risks, while it will take time to achieve a full recovery for the economy and the banks; therefore, rating outlooks (for state-run banks) are likely to remain stable for now," it said.

The appointment of Narendra Modi-led BJP government has improved investors sentiments and the key benchmark indices surged to record levels.

The state-owned banks have been the most affected, in terms of rise in their non-performing assets, by the economic slowdown since 2011 and exposure to problematic infrastructure sector.

All government banks' Viability Ratings, with the exception of State Bank of India, have been downgraded over the last one to two years to the 'bb' category.

However, Fitch said the long term rating of PSU bank continue to be at 'BBB-'.

"The long-term ratings of the major government banks continue to be the same as that of the country's sovereign, at 'BBB-', thanks to expectations of extraordinary government support for senior creditors," the rating agency added.